Thursday, April 12, 2018

Strong trade growth rests on policy choices

The World Trade Organisation (WTO) anticipates merchandise trade volume growth of 4.4 per cent in 2018, as measured by the average of exports and imports, roughly matching the 4.7 per cent increase recorded for 2017.
The growth is expected to moderate to 4 per cent in 2019, below the average rate of 4.8 per cent since 1990 but still firmly above the post-crisis average of 3 per cent. However, there are signs that escalating trade tensions may already be affecting business confidence and investment decisions, which could compromise the current outlook.
"The strong trade growth that we are seeing today will be vital for continued economic growth and recovery and to support job creation," WTO director-general Roberto Azevêdo said adding that this important progress could however be quickly undermined, if governments resort to restrictive trade policies, especially in a tit-for-tat process that could lead to an unmanageable escalation. "A cycle of retaliation is the last thing the world economy needs. The pressing trade problems confronting WTO members is best tackled through collective action."
Trade volume growth in 2017 – the strongest since 2011 – was driven mainly by cyclical factors, particularly increased investment and consumption expenditure. Looking at the situation in value terms, growth rates in current US dollars in 2017 (10.7 per cent for merchandise exports, 7.4 per cent for commercial services exports) were even stronger, reflecting both increasing quantities and rising prices. Merchandise trade volume growth in 2017 may also have been inflated somewhat by the weakness of trade over the previous two years, which provided a lower base for the current expansion.
Asia had the fastest trade volume growth of any region in 2017 on both the export side (6.7 per cent) and the import side (9.6 per cent) following two years of tepid expansion
Asia was responsible for much of the recovery of world merchandise trade in 2017 on both the export and import sides. On the export side, Asia contributed 2.3 percentage points to global growth of 4.5 per cent in the latest year, or 51 per cent of the total increase. Asia also added 2.9 percentage points to world import growth of 4.8, or 60 per cent of the overall increase.